Nehru in the Era of Collapsing Neoliberalism

Twenty years ago, while presenting his first Budget as the Finance Minister of India, Dr Manmohan Singh launched “a sweeping set of neoliberal reforms that would dramatically alter the country’s economic landscape. Viewing the crisis as a historic opportunity to ‘build a new India’, Singh argued that it was essential to terminate ‘outmoded’ commitments to Nehru’s economic nationalism. Spouting with gusto French novelist Victor Hugo’s line that ‘no power on earth can stop an idea whose time has come’, the new Finance Minister promised to realise his neoliberal vision by building on his country’s vast and cheap labour markets, its growing number of educated, but unemployed, professionals, and its considerable natural resources.” (Manfred B. Steger and Ravi K. Roy, Neoliberalism: A Very Short Introduction, OUP, 2010, p. 93)

As a result of neoliberal reforms, the Industrial Policy Resolution of 1956 was scrapped and, barring a few defence-related areas, all industrial activities were thrown open to the private sector and the necessity of securing licence from the government was abolished. Tariff rates were drastically cut so that the Indian market could be thrown open to foreign goods. The exchange rate was liberalised. Not only was the expansion of the public sector brought to an end but the privatisation of existing undertakings also began.

The Narasimha Rao Government pinned high hopes on these reforms. “Convinced by the claims of Western market globalists and determined to put India on the track to becoming a global economic power, Singh believed that the adoption of a fiscal austerity package and strict monetary policies—in conjunction with sizeable structural adjustment programmes from the IMF—would unleash India’s entrepreneurial potential.” (Ibid.)

Montek Singh Ahluwalia, who came to head the Planning Commission, stated that “setting the economy on the path of rapid and sustainable growth” was one of the prime objectives. “This he underlined in the course of his First Raj Krishna Memorial Lecture, 1995.” Raj Krishna, an economist, having been trained by the gurus of the Chicago School of Economics, the foun-tainhead of neoliberalism, had been campaigning against Nehruvian economic thinking and stressing that, without getting rid of it, India could not go beyond the “Hindu Rate of Economic Growth”.

Ahluwalia, a votary of the trickle-down strategy, asserted: “Rapid economic growth provides the only lasting solution to the problems of poverty that have burdened us for so long.” He went on to add that under the new dispensation, “decisions on capacity, location, optimal scale and technology are left to the entrepreneur which is as it should be”.

Therefore what the national movement and its leader, Jawaharlal Nehru, had stood for was thrown into the dustbin. The foremost worry of those freedom fighters had been to protect the integrity of the country and the unity of its people. That is why they were committed to the removal of regional disparities and socio-economic inequalities. They had rejected the trickle-down strategy without any hesitation. As early as 1933-34, in his essay “Whither India?”, Nehru had stated: “Nothing is more absurd than to imagine that all the interests in the nation can be fitted in without injury to any. At every step some have to be sacrificed for others. A currency policy may be good for creditors or debtors, not for both at the same time.” Thus he had advocated active steps on the part of the government for equitable distribution of the results of economic growth: fiscal measures like progressive direct taxation, putting greater burden by way of indirect taxation on the richer sections of the society and subsidising the weaker segments. Besides, reservation in jobs and special efforts to help students were a must to lift up the hitherto backward sections of the society. Second, new industrial enterprises must take care of the hitherto backward areas of the country. Regional imbalances were a legacy of the colonial rule and, if not removed, it would endanger the integrity of the country.

After the introduction of neoliberal economic policies, both these two objectives have been discarded. The result is for all to see. Inequalities are on the rise and they are being reflected in growing tensions, crimes of all sorts, the Maoist movement and so on. Separatist tendencies are again surfacing in Andhra Pradesh, UP and elsewhere.

So far as the propaganda about the so-called Hindu Rate is concerned, it lacks substance. During the Nehru era (1951-64), the average growth rate was 4.1 per cent. If one takes the period—1951-79—it was 3.7 per cent which was higher than most other Asian economies. China had then registered a growth rate of only 2.9 per cent. “For a newly independent nation trying to stand on its own feet after 200 years of highly exploitative and destructive colonialism, a 3.7 per cent growth rate for about 25 years is not bad at all.” (Kanchan Sarkar of Grant MacEwan College in his paper “Economic Growth and Social Inequality: Does The Trickle Down Effect Really Take Place?” in New Proposals: Journal of Marxism and Interdisciplinary Inquiry, Vol. 3, No. 1)

It is now a widely accepted fact that neoliberal reforms have failed to make any serious dent in unemployment. In fact, the unemployment rate has increased since the beginning of neoliberal reforms. Go to Varanasi, Aligarh and Moradabad and you will find the traditional occupations of saree weaving, lock making, and brassware manufacturing respectively have disappeared. Traditional potters, blacksmiths and carpenters have, to a large extent, lost their occupations in the rural areas.

Income inequalities have increased and with this the phenomenon of conspicuous consumption is there for all to see. The mansions of Mukesh Ambani and Sachin Tendulkar are there to illustrate this point. According to a UNDP report of 2008, the share of India’s richest 20 per cent was 45.3 per cent in the national income while the poorest 20 per cent consumed only 8.1 per cent of the national income. During the period of neoliberal reforms, inequality in the distribution of income has been increasing. During 1951-73, inequality was on the decline and then it showed a stable trend until 1992 but afterwards it surged. The fact remains that the urban-rural gap has increased. The neoliberal dispensation has helped mainly people engaged in skill-intensive, export-oriented manufacturing and services sectors. The rural poor had been bypassed till the scheme, MGNREGA, came into existence.

The emergence of inflationary pressures and rampant corruption are the consequences of the neoliberal path adopted by the government. If one goes through the writings of Nehru, one finds that he was fully aware of the need to nip in the bud these two dangers. It is needless to add that if their root cause is not tackled, it will pose a grave danger to our polity. Fissiparous tendencies are sure to go out of control.

All over the world, the neoliberal dispen-sation is collapsing. The Occupy Wall Street Movement indicates this while the root cause of the turmoil in the Arab world has been, among other things, neoliberalism. A pamphlet, The Arab Revolts Against Neoliberalism, published recently in Canada, explains this.

(Mainstream, November 12, 2011)

The author, a well-known economist, used to teach Economics at Kirorimal College, University of Delhi before his retirement a few years ago. He can be contacted at gmishra[at]girishmishra.com